Nonprofit Law/directed funds


I have a businessman associate (not related or employed by the 501c3 charity) that wants to help an established charity, 35 years in existence, that has just set up and receiver IRS approval of a foundation for fund raising to support the charity.  The charity desperately needs branding and advertising to establish their name and raise funds.
The charity wants to do this advertising and branding through the sponsoring a race car driver in National races to get this exposure.  The businessman wants to donate funds to the charity and have the funds paid to the racecar team which will advertise the charity in TV exposure.  The question is; Can the businessman direct the charity to spend his donation to the foundation for the sponsorship and get a tax exemption? My wife and I have volunteering for the charity for several years.  If you wish, I can be also reached by cell phone at . The charity is registered in Kentucky.  Sincerely Carl

I am assuming the businessman is not financially tied to the advertising business or Race car event.  In any case, in a 2002 internal memo, the IRS wrote, "The Service's longstanding position is that an EO [exempt organization] receives a charitable contribution  where it has full control and discretion
as to the use of donated funds, but not where the donor earmarks the contribution for use by an individual or nonexempt organization (or makes the contribution pursuant to a commitment or
understanding that the funds will be  so used).  Rev. Rul. 62-113, 1962-2 C.B. 10.  In the latter situation, the charity acts like an agent of the donor." on the top of pdf page 23.

That Revenue Ruling is available at

On page 18 in a memo entitled "Donor Control" the IRS advised:
--- Start of Excerpt ---
To help clarify the record of the true intentions of a donor at the time of a contribution, the IRS has suggested that the following language be used in a receipt for the contribution: "This contribution is made with the understanding that the donee organization has complete control and administration over the use of the donated funds."
--- End of Excerpt ---

Harvey Mechanic
Attorney at Law

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.

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Harvey Mechanic


I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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